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The new ‘confirmation of payee’ rule coming into force on 30th June is a step forward in the fight against financial fraud. Fraud has skyrocketed during the coronavirus pandemic, so every additional layer of protection the banks introduce should be welcomed – especially if it can save the British public £145 million a year in fraud losses.
However, this new rule doesn’t go far enough. This new rule will go some way to preventing bank transfer fraud – but it’s not enough to put fraudsters off forever. Since the start of the pandemic, we’ve seen fraudsters using more and more sophisticated methods to steal our money. In response, banks must start using more sophisticated technologies to fight them off.
The new rule means banks will have to verify the name of the person we send money to with every new transaction. They will flag if names don’t match, suggesting there may be a fraudster behind a bank account – but they will not block the transaction.
For a more watertight anti-fraud solution, banks should adopt a more thorough identity verification of every new account owner at the onboarding stage. Gone are the days when this was only possible in-person. Now, digital identity verification technologies can do this in minutes on a mobile, as new customers take a selfie and a photo of their ID document. Anti-forgery AI checks the ID document is legitimate, and liveness detection checks the selfie is really being taken by the account opener. Then, machine learning algorithms verify the two against each other. If necessary, human experts can step in, adding an additional layer of verification.
This makes it easier for banks to stop fraudulent accounts ever being opened. This is what the banks should really be working towards if we are ever going to stop fraudsters in their tracks.